Digital Currency Exchanger - DCE

What is 'Digital Currency Exchanger - DCE'

A digital currency exchanger (DCE) is a market maker who exchanges legal tender for electronic currency, or who exchanges one electronic currency for another. A digital currency exchanger charges a commission for this type of transaction, with such exchanges often occurring online rather than at physical locations. This commission can be in the form of a fee or taking the bid/ask spread. Exchangers may also accept payment by credit card, cryptocurrency, wire transfers, money orders or more.

BREAKING DOWN 'Digital Currency Exchanger - DCE'

Digital currency exchangers might send funds directly to an investor's virtual wallet, or convert currencies to prepaid cards that can be used to withdraw cash from ATM machines.

Digital currencies operate as self-governed currencies, unlike fiat money, which is legally sanctioned by a government. For example, digital gold currency (DGC) is a an electronic currency that has its value based upon the value of gold bullion. It offers the same hedge against inflation as stacks of ingots, with added security and convenience.

Investors should take heed of the risks associated with digital currency exchangers, as there has been uncertainty and wide variance with regard to regulation of electronic currency worldwide.

But it may be that, with the rise in popularity of cryptocurrencies, 2018 is the year where many of those regulatory questions come in focus, as Bitcoin Magazine opined. "Things have already begun to heat up as countries around the world grapple with cryptocurrencies and try to determine how they are going to treat them. Some are welcoming, others are cautious. And some countries are downright antagonistic."

Recent developments in digital currency exchange

Digital currency exchangers are in a time of transition with the rise of cryptocurrencies such as bitcoin and others. Regulators in the U.S., U.K., Europe, Asia and elsewhere around the world seem to be finally grappling with the fact that companies operating in this fast-evolving market need to be regulated more definitively.

"There are clear risks for investors and consumers associated to price volatility, including the risk of complete loss of investment, operational and security failures, market manipulation and liability gaps," Bitcoin Magazine quoted Valdis Dombrovskis, vice president of the European Commission.

There are many, many different digital exchanges, some more reliable than others. One of the most popular and mainstream digital currency exchangers is Coinbase.

As the website Lifehacker put it "Think of Coinbase and its ilk as a combination of stock exchange and bank. You can use these exchanges to trade cryptocurrencies and store what you have in a digital wallet (though there are better ways to keep your money safe offline). Most also offer price tickers where you can track the rise and fall of various cryptocurrencies over time."

The site points out that Coinbase charges a base rate of 4 percent for each U.S. transaction, but that amount varies depending whether the investor is paying with a bank account, a credit/debit card or a digital wallet.